Corning stock is firing on all cylinders, but beware of key risks

Corning stock price continued its strong bull run, making it one of the best-performing companies on Wall Street. GLW jumped to a record high of $255.70, up by 190% this year, with its market capitalization rising to over $220 billion.

Corning has become a major player in the AI industry 

Corning, a top technology company, has been one of the most essential players in the booming artificial intelligence industry.

This transition has helped it move from the glass industry it is well-known for. It has announced major deals with companies like Meta Platforms, Nvidia, and Amazon.

Corning will offer fibre and connectivity products to Meta Platforms in a deal worth over $6 billion. It also entered major multi-billion-dollar deals with companies like NVIDIA and Amazon. Its partnership with Nvidia is expected to create over 3,000 jobs in the United States.

These developments are aligning with its Springboard growth strategy, citing demand from its AI infrastructure, which will push it s annual revenue run rate to over $20 billion in the long term.

Corning has become highly overvalued 

The main concern about Corning is that it has become highly overbought despite the ongoing demand for its products. Data shows that the forward price-to-earnings ratio rose to 69, much higher than the sector median of 23. Its multiple is also higher than the five-year average of 22.5. 

The forward EV-to-EBITDA multiple has jumped to 10.5, which is also higher than the sector median of 19.

These numbers are much higher than those of some of the fastest-growing companies in the US. For example, despite its strong revenue growth, Micron has a forward price-to-earnings ratio of just 15, while Nvidia has 22.

Analysts predict that Corning’s revenue growth will not be all that great in the coming years. For example, the average estimate among analysts is that revenue will jump by 15.4% this year to $18.8 billion, followed by $22.5 billion in the next financial year.

Therefore, these numbers mean that the company will need to report strong revenue and profitability growth in the coming quarters to justify the high valuation multiples.

Corning stock is facing technical challenges 

Technicals are also sending a red flag for the stock. As the chart shows, the stock has become highly overbought, with the Relative Strength Index (RSI) moving to 79, its highest point since February 23rd. 

It has also started to form a bearish divergence pattern, which happens when the stock’s price is rising, while the RSI has formed a descending channel.

The stock has also deviated substantially from the historical averages, with the 100-day Exponential Moving Average (EMA) being at $99, much lower than the current $255.

READ MORE: Corning surges to record high: is the AI boom just beginning?